Cardinal Utility Analysis

 The neo-classical utility analysis refers to the theory of consumer behaviour as built by Marshall, Pigou and others. This is based on the CARDINAL MEASUREMENT OF UTILITY, which assumes that utility is measurable and additive.

Utility is measured in hypothetical units which is called "UTILS". If a consumer imagines that 1 mango has 8 utils and an apple has 4 utils, it implies that the utility of 1mango is twice that of an apple.


ASSUMPTIONS

This analysis is based on a set of assumptions which are as follows:-

1) This analysis is based on cardinal concept.

2) Utility is measurable and additive.

3) The consumer is rational who measures, calculates, chooses and compares the utilities of different units of the various commodities and aims at the maximisation of utility.

4) He has full knowledge of the availability of  commodities and their technical qualities.

5) He possess perfect knowledge of the choice of commodities open to him and his choices are certain.

6) He knows the exact prices of various commodities and their utilities are not influenced by variations in their prices.

7) There are no substitutes

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